An anonymous director reports
DYNACOR RETURNS TO PROFIT IN Q3-2020; HIGHEST CASH GROSS OPERATING MARGIN PER OUNCE SINCE 2014 OF $304 PER OUNCE, A YEAR-OVER-YEAR INCREASE OF 34%; OPERATING AT FULL CAPACITY WITH NEAR-TERM PLANS TO EXPAND
Inc. has released its unaudited consolidated financial statements and the management's discussion and analysis (MD&A) for the third quarter ended Sept. 30, 2020.
These documents have been filed electronically with SEDAR and will be available on the corporation's website.
(All figures in this press release are in
millions of U.S. dollars unless stated otherwise. Earnings per share and cash flow per share are in U.S. dollars. All variance percentages are calculated from rounded figures. Some additions might be incorrect due to rounding.)
After a three-month stoppage due to the COVID-19 crisis, which ended a streak of 36 consecutive profitable quarters, the corporation successfully resumed its ore purchase and processing activities, immediately returning to profits. During Q3 2020, the corporation gradually increased ore purchases and generated sales of $24.1-million, recording a net income of $1.2-million (three cents per share).
The resumption of activities, together with the return of employees and suppliers, was very successful and compliant with the Ministry of Health guidelines. The company's COVID-19 sanitary protocol contains measures to monitor the risk of exposure to the COVID-19 at its workplaces, as well as establishing prevention and control standards to avoid the appearance and/or the spread of the virus and to ensure the health and safety of its workers, suppliers, customers and visitors.
Phase two and three of the Peruvian government deconfinement plan started in July and August respectively and although small-scale miners reinitiated activities at a slower pace, the corporation was able to attract available ore, to gradually increase its volume throughput and reached by mid-September its full production capacity rate of 300 tonnes per day. This production level has been maintained since.
Considering its solid financial situation and the gradual resumption of its activities, the corporation pursued its dividend policy and declared, in September, a 1.5-Canadian-cent-per-share dividend which was paid in October.
Highlights for the third quarter of 2020
(variance percentages are calculated based on rounded figures)
Return to strong volume processed following the Q2 2020 temporary shutdown. Volume of 23,064 tonnes processed compared with 3,244 tonnes in the previous quarter (Q2 2020) and to 26,421 tonnes in Q3 2019, a decrease of 12.7 per cent compared with 2019, due to the gradual resumption of operations;
Gold production comparable with Q1 2020
pre-COVID-19 crisis. Gold production of 13,421 ounces compared with 1,897 ounces in Q2 2020 and 22,230 ounces in Q3 2019 due to a lower ore volume and lower grade of ore processed;
Increasing ore inventory level. The corporation's readiness to restart operations allowed for aggressive ore purchases helping increase inventory level and sustain production.
Sales rapidly resumed after reopening. Sales amounted to $24.1-million in Q3 2020, compared with $8.0-million in Q2 2020 and $33.7-million in Q3 2019.
Strong gross operating margin. Gross operating margin of $3.3-million (13.5 per cent of sales) compared with $0.0-million in Q2 2020 and $4.6-million in Q3 2019.
Return to profit. Net income and comprehensive income of $1.2-million (three cents per share), compared with a net loss of $700,000 in Q2 2020 and a net income of $2.3-million in Q3 2019 (six cents per share).
Highest cash gross operating margin per ounce since 2014. Cash gross operating margin
of $304 per ounce in Q3 2020, compared with $117 per ounce in Q2 2020 and $227 per ounce in Q3 2019.
Solid cash flow from operating activities. Cash flow from operating activities before change in working capital items of $2.3-million (six cents per share), compared with $0.0-million in Q2 2020 and to $3.0-million (eight cents per share) in Q3 2019.
Return to positive EBITDA. EBITDA
of $2.7-million, including a $300,000 of write-off of exploration and evaluation assets, compared with negative $100,000 in Q2 2020 and $4.1-million in Q3 2019.
Solid cash position. Cash on hand of $16.6-million in Q3 2020 compared with $6.7-million at year-end 2019.
Cash return to shareholders
Quarterly dividend of 1.5 Canadian cents per share and totalling $400,000 ($600,000 (Canadian)) paid in October, 2020.
RESULTS FROM OPERATIONS
(in thousands of dollars)
Three-month periods ended Sept. 30, Nine-month periods ended Sept. 30,
2020 2019 2020 2019
Sales 24,089 33,667 62,965 79,283
Cost of sales (20,834) (29,053) (54,729) (69,321)
Gross operating margin 3,255 4,614 8,236 9,962
General and administrative expenses (915) (974) (2,752) (3,081)
Other projects (3) (99) (144) (99)
Operating income 2,337 3,541 5,340 6,782
Income before income taxes (2,023) 3,480 4,915 6,586
Net income and comprehensive income 1,249 2,301 2,949 4,237
Earnings per share
Basic $0.03 $0.06 $0.07 $0.11
Diluted $0.03 $0.06 $0.07 $0.11
Total sales amounted to $24.1-million compared with $33.7-million in Q3-2019. The $9.6-million decrease is explained by the decreases in ounces sold (down $15.3-million) due to lower grades of ore processed, partially offset by higher selling prices ($5.7-million).
The company's Q3 2020 operating margin benefitted from the increase in average gold market price in July and August before a slight decrease in September.
Importantly the company achieved a cash gross operating margin of $304 per ounce in Q3 2020, which is 34 per cent higher than in Q3 2019 and the highest dollar cash gross operating margin per ounce since 2014. This significant increase is due to the rising gold market price over the period and the overall higher gold price compared with 2019.
In Q3 2020, the corporation returned to full operational capacity. As of mid-September, the corporation is processing on average 300 tonnes per day which corresponds to the full capacity of the Veta Dorada plant in Chala. In Q4 2020, without any unforeseen events, the corporation projects its yearly best quarterly production and sales, with a quarterly production of approximately 21,000 ounces of gold.
The corporation is presently assessing its near-term plans to progressively expand the plant's processing capacity.
The corporation has planned a $2.4-million drilling program on the Tumipampa project. This program will begin upon agreement with local communities.
Tumipampa is 500 kilometres from Lima, Peru, in the Circa district, province of Abancay, department of Apurimac. Tumipampa's concessions cover 6,932 hectares and are located geographically on the eastern slopes of the Andes Mountain Range between 4,200 and 4,800 metres above sea level.
Major mining companies such as Southern Copper, MMG Ltd., Buenaventura, Golden Ideal Gold Mining (China), Super Strong Mining (China) and Bear Creek Mining own claims surrounding Tumipampa.
Senegal future processing plant
Based on the positive results of the due diligence phases, a new company to be created will move forward on the construction of a new ore processing pilot plant located in Senegal. Plans are for Dynacor to operate the plant and own the majority of the new company with 51-per-cent ownership. KN Equipments Inc. and FONSIS will hold the balance at 25 per cent and 24 per cent, respectively.
The corporation will continue advancing its new Senegalese expansion project upon improvement of the COVID-19 situation.
Dynacor Gold Mines Inc.
Dynacor is a dividend-paying gold production corporation headquartered in Montreal, Canada. The corporation is engaged in production through the processing of ore purchased from the ASM (artisanal and small-scale mining) industry. At present, Dynacor produces and explores in Peru, where its management team has decades of experience and expertise. In 2019, Dynacor produced 80,677 ounces of gold.
Dynacor produces environmental and socially responsible gold through its PX Impact gold program. A growing number of supportive firms from the fine luxury jewellery, watchmakers and investment sectors are paying a small premium to the company's customer and strategic partner for this PX Impact gold. The premium provides direct investment to develop health and education projects to its small-scale artisanal miner's communities.
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